Formal registration of companies has many immediate benefits for the companies and for business owners and employees. Legal entities can outlive their founders. Resources are pooled as several shareholders join forces to start a company. Formally registered companies have access to services and institutions from courts to banks as well as to new markets. And their employees can benefit from protections provided by the law. An additional benefit comes with limited liability companies. These limit the financial liability of company owners to their investments, so personal assets of the owners are not put at risk. Where governments make registration easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and generating more revenue for the government.
Below is a detailed summary of the bureaucratic and legal hurdles faced by entrepreneurs wishing to incorporate and register a new firm in Ethiopia. It examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per-capita gross national income.
This information was collected from World Bank: Doing Business
| No. | Procedure | Time to Complete | Associated Costs |
|---|---|---|---|
| 1 | Check the company name for uniqueness | 1 day | no charge |
| 2 | Authentication of the company documents and of the lease agreement at the office of registration of Acts and documents | 2 days | ETB 390 |
| 3 | Submit documents and obtain a letter from the Commercial Registry to open a bank account | 1 day | No charge |
| 4 | Open a bank account | 1 day | no charge |
| 5 | Register and obtain the Commercial registration certificate | 1 day | ETB 80 |
| 6 | Make a company seal | 2-3 days | ETB 100 |
| 7 | Register with Ethiopian Inland Revenue Authority and Customs for income tax and VAT | 2 days | no charge |
| 8 | Obtain business license | 1 day | ETB 80 |
| 9 | Install a cash registration machine | 1-5 days | ETB 5,000-10,000 |